The Term Corr(ε R , ε T ) = 0

question 2

Multiple Choice

The term Corr(ε R , ε T ) = 0 tells us that:

• A)all error terms of company R and T are 0.
• B)the unsystematic risk of companies R and T is unrelated or uncorrelated.
• C)the correlation between the returns of companies R and T is -1.
• D)the systematic risk companies R and T is unrelated.
• E)None of the above.

---

Definitions:

Necessary

Required to be done, achieved, or present; needed; essential.

Sufficient Features

Characteristics or aspects of something that are enough to define, categorize, or identify it distinctly.

ACT Models

Refers to a family of cognitive models, including the Adaptive Control of Thought, which aim to explain how humans think, learn, and solve problems.

Procedural Knowledge

Knowledge of how to perform certain tasks, often expressed as skills and abilities, as opposed to knowing that something is the case (declarative knowledge).